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Comment by scottkduncan | Hacker News Reader

Not that this is the best place to hash out a buy vs. rent argument (the answer of course is, it depends), but there are loads of uncertainties associated with buying. How high will my property taxes go? Will the market where I am go up or down? What will my future maintenance costs be? Will I have to pick up and move to another city unexpectedly? Variability in all of those affects what kind of return you get on buying, if at all.

Then there are the transaction and opportunity costs associated with buying...locking up a down payment, closing costs, broker costs. I'm sure I'll buy in the future when I'm at a different point lifewise, but for now renting works just fine.

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This is why I hate property taxes. It means that I can't just buy a house and live in it. I have to make sure my house doesn't get too expensive for ME to live in. I can't just look forward to retiring in my house. It's taxes until I die.

Even in the absence of property taxes, utility and maintenance costs (and changing market rates for required labor and materials that drive those) would pose the same risk. Property taxes are hardly the only required expenses that might go up when owning a house (and, in CA, have strict constitutional limits on increases, unlike most other necessary expenses.)

Isn't the issue with property taxes that weath taxes are not legal under the constitution. The government is not allowed to just tax (ie, take) your assets. Income and Real estate are just imperfect proxies "wealth".

> Isn't the issue with property taxes that weath taxes are not legal under the constitution.

No, because that's not true (federal property taxes would probably be problematic under the Constitution, which restricts non-apportioned federal taxes, but property taxes aren't federal.)

Property taxes are used (primarily) because states & localities don't have clean jurisdiction or nexus on a household's financial assets.

(which makes "wealth" taxes problematic or impractical)

Do you have a better method for accounting for the externality of restricting that land to your private use and accounting for your local externalities?

(This is not a rhetorical question.)

The amount of wear one homeowner causes to the roads or the amount it costs to educate one family's children is not dependent on local property values.

And the "externality" in restricting that land to your private use is captured by the housing market. If you're sitting on a plot of land worth a million dollars, it means you value that land at more than a million dollars, because otherwise you would sell it. Sitting on it is costing you access to a million dollars. Living there is costing you the money you could get by renting it out.

That is true, but you have to remember that rates are often adjusted when property values increase. In other words, if home values double in 5 years, the city doesn't get twice the property tax revenues, as the rates are often adjusted downward to meet the desired budget.

> That is true, but you have to remember that rates are often adjusted when property values increase.

If your argument is that the property tax rate on a million dollar home will be lowered until the absolute number of tax dollars paid is the same as that paid on a $250K home, the evidence is to the contrary. Municipalities that see an increase in tax revenues at the same rate more often see it as an excuse to expand the budget than an excuse to lower tax rates, especially in California.

I'll admit my anecdote is an outlier, but I have seen a few examples of it.

Take a look at local city budgets. When housing prices doubled, the cities tax revenues didn't. They certainly went up overall (I mean, when has a gov't ever not expanded?), but my argument is that often 2house price =/= 2property taxes.

That's because, again, in California, rapid market value increases of individual properties aren't immediately factored in to tax basis (because assessed value for property tax purposes can only increase 2% per year without a sale or new construction), but individual value decreases are immediately reflected in tax basis (because there is no cap on decreases in assessed value), so if prices of housing in an area double on average, but only a small percentage of units change hands, you see a very small increase (at most) in overall tax revenue.

That's an effective cut in the overall property tax rate, but its not a city "adjusting" the rate down to meet the desired budget, its the nominal rate remaining fixed (because that's also capped by Prop 13), and the tax basis value on most properties whose value has increased not reflecting the value increase.

My anecdote is from a city that doesn't have a property tax increase limit. Housing prices doubled in the span of 5 years, but the cities total budget only went up by 30% or so. The mill rate actually decreased.

> That is true, but you have to remember that rates are often adjusted when property values increase. In other words, if home values double in 5 years, the city doesn't get twice the property tax revenues, as the rates are often adjusted downward to meet the desired budget.

That almost never happens. OTOH, in California, if a home doubles in value in 5 years and doesn't change ownership or have new construction, the assessed value for property tax purposes at the end of that 5 year increase would only be 1.1× the starting tax basis, since Prop 13 limits assessed value to increase at most 2% per year.

The quantity of roads in length and width available increases and I wouldn't be surprised if the cost of supporting that infrastructure rises with the square of the land accessible by those roads (i.e. one long road is much cheaper to maintain that a grid of roads with equivalent length in miles). If the homeowners are only allowed to drive on the roads that were there when they bought their home the situation would be fair.

Education on the other hand I expect to remain fairly constant on a per unit (child) basis once a school hits 150 children per grade.

> And the "externality" in restricting that land to your private use is captured by the housing market. If you're sitting on a plot of land worth a million dollars, it means you value that land at more than a million dollars, because otherwise you would sell it. Sitting on it is costing you access to a million dollars. Living there is costing you the money you could get by renting it out.

Here in London there are whole apartment blocks owned solely by investors with no-one living in them. That's morally repugnant, a deadweight loss, whatever sophist arguments you can come up with for why really the right thing. Property taxes are a nudge in the right direction.

In the UK 'council tax' is paid at a level set, in bands, by the value of your house and your band is generally not reassessed unless you request it. Additionally, if you're unemployed, retired, or the house is 100% occupied by students, the amount payable is reduced (to £0 in some cases).

The charge for council tax is set at the 'band C' level, and scaled up/down for bands A-H. (A being the lowest property value.)

Additionally we have 'stamp duty', which is paid when you sell the house, as a percentage of the sale price above a threshold, and if you've lived in the property for less than three years you're also liable for capital gains tax on the sale.

This isn't an ideal system - but it does present an alternative to what's being discussed here. I imagine that a quick trip through Wikipedia would show other alternatives in use throughout Europe.

If you buy a $500k house you pay $5k/year in prop taxes. If that home doubles in value, you have $500k more in wealth (that you can tap withou cash out refinance) and pay an extra $5k in prop taxes. I'd say you're doing ok.

How exactly are you going to tap that wealth? Take out a loan, on which you pay interest. If you lose ability to pay that loan, a lien on your house - or even a foreclosure results.

Basicallly there is no real way to not be a beholden slave to the monetary system and debt.

You tap that wealth by selling the house. You don't just get to turn something that you get to continue using into cash for free. Somebody is taking the risk that the value of the house is going down. And anyway, usually interest on refis are lower than what you can get prudently investing the money.

As I said, cash out refinance (easy with 50% equity).

Yes, if you're buying a house in the US you are typically going to take on some debt.

Those costs are all baked in to the price of rent. It's not like you get out of paying property tax by renting. Housing prices go up = your rent goes up.

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